Salary sacrifice novated leases
Discussion
no idea if the same thing but up here we can Salary Scarifice (government) and lease a car throught them- theoretically paying less as its pre-tax and the cars are bought in bulk so should be less depreciation to cover.
However my collegue has a 2010 Rav 4, she just informed me that she is paying $900 a fortnight!!!!!
I was paying less than half that a month for a brand new (2012) Fiesta which I chopped in for a decent 2006 CRV (bloody babies), and I will own mine after another two years.
I would seriously sit down and do the sums before committing to anything like that.
However my collegue has a 2010 Rav 4, she just informed me that she is paying $900 a fortnight!!!!!
I was paying less than half that a month for a brand new (2012) Fiesta which I chopped in for a decent 2006 CRV (bloody babies), and I will own mine after another two years.
I would seriously sit down and do the sums before committing to anything like that.
I would suspect the $900 is pre tax and also includes running costs. ie $600 rego, $1000 insurance, $3000 of fuel a year, $500 of servicing a year. $800 of tyres.
These are made up numbers, I have made just to demonstrate it.
Fortnightly pay. $4500 before tax = $2500 after tax.
With the $900 taken out before tax, your fortnightly pay becomes $3600 = $2000 after tax, so the car and its running costs effectively cost you $500 a fortnight out of your take home pay.
Depending on which type of lease, there may be a residual which you have to pay at the end, it is calculated before you start. Other one was operating lease where you hand the car back at the end.
The FBT is calculated at 20% now fixed not a sliding scale depending on how many kms you did.
As mentioned, Highly recommend you sit down and work out the sums first.
http://www.sgfleet.com/au/salary-packaging/
These are made up numbers, I have made just to demonstrate it.
Fortnightly pay. $4500 before tax = $2500 after tax.
With the $900 taken out before tax, your fortnightly pay becomes $3600 = $2000 after tax, so the car and its running costs effectively cost you $500 a fortnight out of your take home pay.
Depending on which type of lease, there may be a residual which you have to pay at the end, it is calculated before you start. Other one was operating lease where you hand the car back at the end.
The FBT is calculated at 20% now fixed not a sliding scale depending on how many kms you did.
As mentioned, Highly recommend you sit down and work out the sums first.
http://www.sgfleet.com/au/salary-packaging/
I looked into this in NSW when I first got here. Essentially you get deducted the lease amount off your salary before it goes through payroll so in effetc you pay less tax up front. However, you can get the same benefit by using an accountant at year end.
The main reason I didn't bother was how much the companies wanted to rip you off for service costs, tyres, fuel, insurance tec which I could get at much much cheaper rates.
So for me it works if you really have lots of cash and can't be ar*sed to do a bit of leg work otherwise don't bother.
BTW VW are doing 0% and fixed price servicing til 9th July.
The main reason I didn't bother was how much the companies wanted to rip you off for service costs, tyres, fuel, insurance tec which I could get at much much cheaper rates.
So for me it works if you really have lots of cash and can't be ar*sed to do a bit of leg work otherwise don't bother.
BTW VW are doing 0% and fixed price servicing til 9th July.
motomk said:
I would suspect the $900 is pre tax and also includes running costs. ie $600 rego, $1000 insurance, $3000 of fuel a year, $500 of servicing a year. $800 of tyres.
These are made up numbers, I have made just to demonstrate it.
Fortnightly pay. $4500 before tax = $2500 after tax.
With the $900 taken out before tax, your fortnightly pay becomes $3600 = $2000 after tax, so the car and its running costs effectively cost you $500 a fortnight out of your take home pay.
Depending on which type of lease, there may be a residual which you have to pay at the end, it is calculated before you start. Other one was operating lease where you hand the car back at the end.
The FBT is calculated at 20% now fixed not a sliding scale depending on how many kms you did.
As mentioned, Highly recommend you sit down and work out the sums first.
http://www.sgfleet.com/au/salary-packaging/
something like that however she does more KM than allowed (she only drives it to work and back) so has to pay on top for that, she has to pay extra for fuel as she doesnt get enough. Insurance I dont know about.These are made up numbers, I have made just to demonstrate it.
Fortnightly pay. $4500 before tax = $2500 after tax.
With the $900 taken out before tax, your fortnightly pay becomes $3600 = $2000 after tax, so the car and its running costs effectively cost you $500 a fortnight out of your take home pay.
Depending on which type of lease, there may be a residual which you have to pay at the end, it is calculated before you start. Other one was operating lease where you hand the car back at the end.
The FBT is calculated at 20% now fixed not a sliding scale depending on how many kms you did.
As mentioned, Highly recommend you sit down and work out the sums first.
http://www.sgfleet.com/au/salary-packaging/
I'm in one as I got a very good deal as a state government employee at the time.
Next purchase will be done as a commercial hire purchase or similar through the business as it works out as a better cashflow outcome.
I have huge amounts sitting in the "maintenance fund" becuase I don't use VW for my services and source my own tyres. Should be around 10k at the end of the lease.
It works for me because of high kms and don't need to worry about fuel costs. But I wouldn't bother on low kms.
Next purchase will be done as a commercial hire purchase or similar through the business as it works out as a better cashflow outcome.
I have huge amounts sitting in the "maintenance fund" becuase I don't use VW for my services and source my own tyres. Should be around 10k at the end of the lease.
It works for me because of high kms and don't need to worry about fuel costs. But I wouldn't bother on low kms.
To me it looked like a very convoluted way to not save very much money at all.
I have not bought a car yet that has been worth that much money that I cannot pay cash. I just don't understand the concept of losing so much money on a car unless its through a business and con be completely offset via clever depreciation and accounting as well as allowing cash assets to be put to better use.
If I were to finance a car it would be on the most simple of plans with no penalty to paying off early and that's what I would do to reduce as far as possible the amount of interest paid. That to me makes sense, most expensive debt goes first.
I think novated leases used t make more sense when they discounted for higher milages. If you often drove for you job or whatever it made sense and all the servicing costs were taken care of, but otherwise, don't bother.
I have not bought a car yet that has been worth that much money that I cannot pay cash. I just don't understand the concept of losing so much money on a car unless its through a business and con be completely offset via clever depreciation and accounting as well as allowing cash assets to be put to better use.
If I were to finance a car it would be on the most simple of plans with no penalty to paying off early and that's what I would do to reduce as far as possible the amount of interest paid. That to me makes sense, most expensive debt goes first.
I think novated leases used t make more sense when they discounted for higher milages. If you often drove for you job or whatever it made sense and all the servicing costs were taken care of, but otherwise, don't bother.
TAS1981 said:
To me it looked like a very convoluted way to not save very much money at all.
I have not bought a car yet that has been worth that much money that I cannot pay cash. I just don't understand the concept of losing so much money on a car unless its through a business and con be completely offset via clever depreciation and accounting as well as allowing cash assets to be put to better use.
If I were to finance a car it would be on the most simple of plans with no penalty to paying off early and that's what I would do to reduce as far as possible the amount of interest paid. That to me makes sense, most expensive debt goes first.
I think novated leases used t make more sense when they discounted for higher milages. If you often drove for you job or whatever it made sense and all the servicing costs were taken care of, but otherwise, don't bother.
The final paragraph sums it up for me. I have not bought a car yet that has been worth that much money that I cannot pay cash. I just don't understand the concept of losing so much money on a car unless its through a business and con be completely offset via clever depreciation and accounting as well as allowing cash assets to be put to better use.
If I were to finance a car it would be on the most simple of plans with no penalty to paying off early and that's what I would do to reduce as far as possible the amount of interest paid. That to me makes sense, most expensive debt goes first.
I think novated leases used t make more sense when they discounted for higher milages. If you often drove for you job or whatever it made sense and all the servicing costs were taken care of, but otherwise, don't bother.
30,000+ a year was a sweet spot for leasing. 40,000 even more. I was one of the last to enjoy the benefits of the 40,000+ package as it has great tax implications.
If I do it again (still looking at options) I would do it with a cheaper, disposable car purely for business use and get a second car for weekends. Given my usage I can still get good rates on the logbook method as I'm around 85% business use.
My Falcon just sold was on a Commercial Hire Purchase. I did look at leases but found them a)very confusing as to the exact benefits and working calculations and b) very expensive. As has been mentioned you're locking in not only full purchase price but also running costs at max margin. So effectively you're paying full whack for everything.
Everyone seems to know what a lease is but when you ask 'how does it actually work and where are the savings' even the money guys in my office shake their heads a bit.
One of the reasons I got mine on CHP was that I could buy my car, no deposit, transfer duty and rego included and obtain the tax efficiency required.
The car listed at $62k (G6T), I got an ex-ford car 9 mths old, 7000kms on the clock, for $43k with a monthly cost of $700 and a balloon of $18k. I had to pay all my own tires, services, rego etc (work pay for fuel) but I could choose where.
I just sold it after 2 and a bit years with just a couple of grand to clear, but heres the kicker have found out my old acct was lazy and just claimed under the 5000kms no receipt model and really should have claimed:
- depreciation (apparently $23k over 2 years at 40%...)
- tax depreciation on servicing, rego, tyres even cleaning
- interest on the loan
So in other words am due quite a few $ back. So yes I've had to pay the running costs up front but it looks like Net its going to have cost me c.$400 per month to run a G6 Turbo and thats pretty bloody good if you ask me.
Everyone seems to know what a lease is but when you ask 'how does it actually work and where are the savings' even the money guys in my office shake their heads a bit.
One of the reasons I got mine on CHP was that I could buy my car, no deposit, transfer duty and rego included and obtain the tax efficiency required.
The car listed at $62k (G6T), I got an ex-ford car 9 mths old, 7000kms on the clock, for $43k with a monthly cost of $700 and a balloon of $18k. I had to pay all my own tires, services, rego etc (work pay for fuel) but I could choose where.
I just sold it after 2 and a bit years with just a couple of grand to clear, but heres the kicker have found out my old acct was lazy and just claimed under the 5000kms no receipt model and really should have claimed:
- depreciation (apparently $23k over 2 years at 40%...)
- tax depreciation on servicing, rego, tyres even cleaning
- interest on the loan
So in other words am due quite a few $ back. So yes I've had to pay the running costs up front but it looks like Net its going to have cost me c.$400 per month to run a G6 Turbo and thats pretty bloody good if you ask me.
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